YELLOW BUS LINES, INC., PETITIONER V. DRIVERS, CHAUFFEURS AND
HELPERS LOCAL UNION 639, ET AL.
No. 90-872
In The Supreme Court Of The United States
October Term, 1990
On Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The District Of Columbia Circuit
Brief For The United States As Amicus Curiae
This brief is filed in response to the Court's order inviting the
Solicitor General to express the views of the United States.
TABLE OF CONTENTS
Questions Presented
Statement
Discussion
Conclusion
QUESTIONS PRESENTED
1. Whether the "person" named as the defendant under 18 U.S.C.
1962(c) may be identical to the "enterprise" whose affairs the person
is alleged to have conducted through a pattern of racketeering
activity.
2. Whether the phrase "to conduct or participate, directly or
indirectly, in the conduct of (the) enterprise's affairs" in 18 U.S.C.
1962(c) requires proof that the defendant exercised control over the
management or operation of the enterprise.
3. Whether a civil RICO plaintiff may include in an alleged
"pattern of racketeering activity" under 18 U.S.C. 1962(c) acts of
racketeering that are not directed at the plaintiff.
4. Whether the court of appeals' decision is consistent with
Congress's direction to construe the provisions of RICO liberally to
effectuate the statute's remedial purposes.
STATEMENT
1. Petitioner Yellow Bus Lines, Inc. was a Virginia corporation
providing bus service for schools in the District of Columbia. In
November 1981, eight employees of Yellow Bus engaged in a four-day
strike to gain recognition for the Drivers, Chauffeurs and Helpers
Local 639 (Local 639) as the employees' collective bargaining
representative. According to the company, the strikers engaged in
threats and violence against company property with the encouragement
of Local 639 and its business agent, James Woodward. After an
incident in which Woodward allegedly threatened to "burn the company
buses," Woodward was arrested and charged with criminal offenses. On
November 4, 1982, Woodward filed suit in the United States District
Court for the District of Columbia against a police officer, the city,
and three officers of Yellow Bus, alleging abuse of process and false
arrest. The defendants in that action filed counterclaims, alleging
malicious destruction of property and other tort claims. Pet. App.
46, 48-50, 105-106.
In April 1983, Yellow Bus also filed a complaint in district court
against Local 639 and Woodward, alleging violations of the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(c) and
(d), and requesting treble damages under 18 U.S.C. 1964(c). /1/ In
June 1984, the district court dismissed the RICO claims against Local
639. It reasoned that the complaint was defective in naming the union
both as the "person" liable and the "enterprise" under RICO, thus
violating a requirement that those entities be distinct. The court
also denied petitioner's motion to amend the complaint to name Local
639 as the RICO "person" and Yellow Bus as the "enterprise." In
October 1984, the district court granted summary judgment in favor of
Woodward on the RICO claims against him because Yellow Bus had failed
to allege a racketeering injury. Pet. App. 9-10, 12, 65-66; Br. in
Opp. App. 13a, 19a.
Having disposed of the RICO claims, the district court proceeded to
trial on the remaining state law claims. /2/ The jury returned a
verdict in favor of Yellow Bus, awarding a total of $133,200 for
malicious destruction of property, intentional interference with
contractual relations, and abuse of process. In January 1986, the
district court granted a motion by Woodward and the union for judgment
notwithstanding the verdict, except as to the award of $1,280 against
Woodward for malicious destruction of property. Pet. App. 50-51,
103-121.
2. On appeal, the court of appeals reinstated the malicious
destruction of property claim against Local 639, but otherwise
affirmed the judgment on the tort claims. It reversed, however, the
district court's dismissal of the RICO claims. Br. in Opp. App.
2a-27a. With respect to the RICO claim against Woodward, the court of
appeals noted that during the trial of this case, this Court decided
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985), holding that a
civil RICO plaintiff need not allege a separate "racketeering injury"
that is distinct from the injury resulting from the predicate acts
themselves. In light of Sedima, the court of appeals reversed summary
judgment for Woodward and remanded for trial. Br. in Opp. App. 13a;
Pet. App. 12-13, 69-70.
With respect to the RICO claims against Local 639, the court of
appeals agreed with the district court that the original complaint's
designation of Local 639 both as the "person" and the "enterprise"
made the claim defective under Section 1962(c). Aligning itself with
the majority view of the courts of appeals, the court held that the
language of 18 U.S.C. 1962(c) and its underlying purpose require that
the person and the enterprise be different entities. Br. in Opp. App.
14a-17a. /3/
The court of appeals disagreed, however, with the district court's
refusal to permit Yellow Bus to amend its complaint to allege itself
as the "enterprise." The district court had thought that such an
amendment would still fail to state a claim because Local 639 did not
engage in the conduct of Yellow Bus's affairs; rather, the company
was merely the "setting" for the union's strike activities. Br. in
Opp. App. 19a. The court of appeals, however, determined that the
requirement in 18 U.S.C. 1962(c) that the defendant "conduct or
participate, directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering activity" was
satisfied here. The court explained that Section 1962(c) "refers to
direct as well as indirect participation in the enterprise's affairs,
and imposes no requirement that participation be at the management
level or relate to 'core functions.'" Br. in Opp. App. 22a. Although
the union did not play a role in Yellow Bus's management, it was
alleged to have influenced the employee's strike for recognition of
the union, and that "is an activity sufficiently related to the
company's ongoing role as a business enterprise and employer to
establish the requisite nexus." Id. at 24a-25a.
Finding that the predicate acts of racketeering charged in the
complaint were sufficient to allege a "pattern," /4/ the court
remanded for trial on the RICO claims after Yellow Bus had an
opportunity to amend its complaint. Br. in Opp. App. 12a-13a, 27a.
3. On respondents' petition for a writ of certiorari, this Court
vacated the judgment and remanded for further consideration in light
of H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989),
which clarified the standards for demonstrating the existence of a
"pattern" of racketeering activity under RICO. Drivers Local Union
No. 639 v. Yellow Bus Lines, Inc., 492 U.S. 914 (1989). On remand,
the court of appeals held (Pet. App. 96-98) that H.J. Inc. did not
affect its conclusions with respect to the adequacy of the pattern
alleged in this case; it therefore reissued its earlier opinion and
reinstated the judgment in all respects. Pet. App. 45-102.
4. The court of appeals granted rehearing en banc to review the
standard by which a person can be said to participate in the conduct
of the enterprise's affairs under 18 U.S.C. 1962(c), and, in
particular, to determine whether Local 639 could be alleged to have
participated in the affairs of Yellow Bus as the enterprise. Pet.
App. 6-7, 13-15. /5/ After examining the various tests articulated by
the courts of appeals, the court concluded that to participate in the
conduct of the enterprise's affairs requires the defendant to exercise
some significant control over the management or operation of the
enterprise. Id. at 15-27. The word "(c)onduct," the court explained,
"is synonymous with 'management' or 'direction'"; accordingly, "(i)n
order to participate in the conduct of an enterprise's affairs, * * *
a person must participate, to some extent, in 'running the show.'" Id.
at 25-26. That level of participation would ordinarily require that
the defendant take part in "directing the enterprise toward its
preexisting goals" or in "exercising control over an enterprise so as
to reset its goals." Id. at 26.
Applying its "management" test to the facts here, the court
concluded that Local 639, "through its organizational efforts and the
activities allegedly associated with its strike for recognition, did
not conduct or participate in the conduct of Yellow Bus's affairs."
Pet. App. 35. It therefore held that the district court correctly
refused to allow Yellow Bus to amend its complaint to name itself as
the Section 1962(c) enterprise. Pet. App. 37-38.
DISCUSSION
Petitioners challenge two principal holdings of the court of
appeals: first, that the person and enterprise named in a complaint
under 18 U.S.C. 1962(c) must be distinct entities, and second, that to
satisfy the requirement of "participat(ing) * * * in the conduct of
(the) enterprise's affairs" under that section, a RICO defendant must
participate in the management or direction of the enterprise in some
fashion. As to the person-enterprise issue, all but one of the
circuits agree with the decision below that the RICO statute requires
a distinct "person" and "enterprise" in order to state a claim for
relief under Section 1962(c). Although we continue to believe that
the minority rule reflects the better reading of the statute, the
majority rule has neither impeded the government's enforcement of RICO
in criminal cases nor interfered with the operation of RICO in civil
cases. Accordingly, we see no need for this Court to intervene at
this time.
As to the issue of the defendant's participation in the "conduct"
of the enterprise's affairs, we believe that the court of appeals
erred in adopting a test that looks to whether the defendant managed
or directed the enterprise, or participated in that function. Such an
approach gives an unduly narrow meaning to the statutory language,
undermines RICO's purpose to establish a forceful and effective remedy
against all levels of organized criminal activity, and conflicts with
the formulations articulated by other courts of appeals. But we do
not suggest that the Court review this issue, which is important to
the construction of RICO, in the present context. On the facts of
this case, it is unlikely that petitioner would prevail under any
circuit's "conduct" test. Moreover, although the test stated by the
court of appeals has potential to give rise to difficulties in
enforcing RICO, it is far from clear that those difficulties will
materialize. As applied in particular cases, the court's somewhat
elastic test may well be construed to produce results that are fully
consistent with those of other circuits. Finally, to the extent that
labor law considerations influenced the court of appeals to find that
the "conduct" requirement was not satisfied as to a striking union's
relationship to a struck company, the precedential significance of the
case is diminished. If this Court's intervention does become
appropriate, a more characteristic RICO case would furnish a better
vehicle for giving guidance to the lower courts. Accordingly, the
petition should be denied. /6/
1. Petitioner initially contends (Pet. 13-16) that the court of
appeals erred in adopting the rule that the "person" and the
"enterprise" alleged in a RICO suit may not be identical. All but one
of the circuits considering that question require the defendant
"person" and the "enterprise" whose affairs the person is alleged to
have conducted through a pattern of racketeering to be different
entities. See, e.g., Busby v. Crown Supply, Inc., 896 F.2d 833, 840
(4th Cir. 1990); Puckett v. Tennessee Eastman Co., 889 F.2d 1481,
1488-1489 (6th Cir. 1989); Saporito v. Combustion Engineering, Inc.,
843 F.2d 666, 678 (3d Cir. 1988), vacated on other grounds, 489 U.S.
1049 (1989); Garbade v. Great Divide Mining & Milling Corp., 831 F.2d
212, 213 (10th Cir. 1987); Bishop v. Corbitt Marine Ways, Inc., 802
F.2d 122, 123 (5th Cir. 1986) (per curiam); Schofield v. First
Commodity Corp., 793 F.2d 28, 30-33 (1st Cir. 1986); United States v.
Benny, 786 F.2d 1410, 1414-1416 (9th Cir.), cert. denied, 479 U.S.
1017 (1986); Bennett v. United States Trust Co., 770 F.2d 308, 315
(2d Cir. 1985), cert. denied, 474 U.S. 1058 (1986); Haroco, Inc. v.
American National Bank, 747 F.2d 384, 399-402 (7th Cir. 1984), aff'd
on other grounds, 473 U.S. 606 (1985); Bennett v. Berg, 685 F.2d
1053, 1061-1062, aff'd in pertinent part, 710 F.2d 1361 (8th Cir.
1982) (en banc), cert. denied, 464 U.S. 1008 (1983).
The Eleventh Circuit alone has ruled that the person and enterprise
alleged under Section 1962(c) need not be distinct entities. In
United States v. Hartley, 678 F.2d 961, 986-990 (1982), cert. denied,
459 U.S. 1170, 1183 (1983), the court concluded that nothing in RICO's
language or legislative history precluded a corporation's dual role
both as the defendant "person" and the subject "enterprise."
Initially, the court noted that a corporation easily fits within the
statutory definitions of both "person" and "enterprise." 18 U.S.C.
1961(3) states that "'person' includes any individual or entity
capable of holding a legal or beneficial interest in property."
Section 1961(4) states that "'enterprise' includes any individual,
partnership, corporation, association, or other legal entity, and any
union or group of individuals associated in fact although not a legal
entity." In light of the broad reading given the term "enterprise" by
this Court in United States v. Turkette, 452 U.S. 576 (1981), the
court concluded that the same entity can be at once the defendant and
the enterprise. Hartley, 678 F.2d at 988. The court also relied on
the incongruity that would result if an individual were the central
figure in a crime ring, but could escape RICO liability while his
underlings were held liable for associating with him; the existence
of an alternative RICO charge in which a corporation and its employees
collectively could be considered an "association-in-fact" enterprise
and the corporation held liable as the defendant "person"; and the
familiar corporate law distinction that treats a corporation both as
entity (the RICO person) and, upon piercing the corporate veil, as
aggregate of its agents (the RICO enterprise). Id. at 988-989.
The linchpin of the majority view is that Section 1962(c) requires
the defendant person to be "employed by or associated with any
enterprise"; courts have thought that this phrase contemplates a
person who is distinct from the enterprise, and a relationship between
the two. See Haroco, 747 F.2d at 400; Schofield, 793 F.2d at 30.
Courts have also found difficulties in viewing a person as associating
with himself. See Pet. App. 72; McCullough v. Suter, 757 F.2d 142,
144 (7th Cir. 1985). In addition, courts have argued that the RICO
statute was intended to target the exploitation and infiltration of
legitimate business by corrupt persons. When a legitimate business is
the victim of the racketeering activity by its own employees, allowing
the person and the enterprise to be identical would clash with that
purpose by holding the victim liable for the acts of its unfaithful
agents. Haroco, 747 F.2d at 401; Schofield, 793 F.2d at 30-31. On
the other hand, when the corporation itself is reaping profits from
racketeering activity, the corporation can be held liable under RICO's
Section 1962(a), which prohibits the investment of racketeering
proceeds in an enterprise; that provision does not contain language
suggesting that the person and enterprise must be distinct. Ibid.;
see also Busby, 896 F.2d at 840-841 & n.9 (ruling en banc that Section
1962(a), as opposed to Section 1962(c), does not require a distinct
person and enterprise, and citing cases for that proposition from six
other circuits).
Although the majority view is not without force, we believe that
Hartley's reasoning represents the better interpretation of the
statute. The linguistic objections raised by the majority view are
not ultimately persuasive. While the concept of being associated with
oneself is not familiar usage, the concept of being self-employed
certainly is, and fits well within the language of the statute.
Although, in practice, violations of Section 1962(c) ordinarily
involve a person (or entity) that has a relationship with a separate
enterprise, in the case of an otherwise-legitimate business entity
that is aggressively conducting structured criminal activity through
its own agents, it fully accords with RICO's expansive language and
objectives to apply Section 1962(c).
Nevertheless, we do not believe that the Court should review the
person-enterprise issue in this case. It has long been the policy of
the Department of Justice not to approve criminal RICO prosecutions
naming the identical person and entity under Section 1962(c) except in
extraordinary circumstances. Application of this policy has not
hampered enforcement of RICO because, in virtually all cases, a
corporation or other business organization that has affirmatively
devoted itself to racketeering can be reached under RICO's Section
1962(a), which, as we have noted, has been construed not to require a
separate person and enterprise. Moreover, in some settings, it is
possible to charge the corporation as a defendant and as a member of
an association-in-fact enterprise without running afoul of the
person-enterprise rule under Section 1962(c). See Alcorn County v.
United States Interstate Supplies, 731 F.2d 1160, 1168 (5th Cir. 1984)
(defendant corporation, two of its employees, and a court clerk
constituted RICO enterprise); Cullen v. Margiotta, 811 F.2d 698,
729-730 (2d Cir.), cert. denied, 483 U.S. 1021 (1987). /7/ And it is
well established that an individual may be charged both as a defendant
and as a member of an association-in-fact enterprise, in which case
the defendant and the enterprise will not be identical. See, e.g.,
United States v. Perholtz, 842 F.2d 343, 352-354 (D.C. Cir.), cert.
denied, 488 U.S. 821 (1988).
Nor does the separate-person-and-enterprise rule under Section
1962(c) appear to have impeded private use of RICO. Plaintiffs have
enjoyed relative success in pleading claims that surmount that
obstacle against entity defendants. See D. Smith & T. Reed, Civil
Rico Paragraph 3.07, at 3-62 (1990). If this Court were to reject the
restriction, the benefits flowing to private RICO plaintiffs would be
marginal at best.
Finally, this case presents a particularly poor candidate for
review, because it appears doubtful that petitioner stands to recover
even if permitted to proceed under RICO. Damages are available under
RICO only if produced "by reason of" the violation, 18 U.S.C. 1964(c),
and substantial evidence indicated that Yellow Bus suffered from
serious internal difficulties and that those problems, rather than any
union activities, caused its eventual collapse. Pet. App. 11, 51-65,
108-115. In addition, although the court of appeals found that
petitioner has alleged a "pattern" of racketeering activity, it
appears doubtful that petitioner can prove at trial a pattern that
satisfies the requirement of continuity, or the threat of continuity,
articulated by this Court in H.J. Inc. v. Northwestern Bell Telephone
Co., supra. The strike here lasted four days and occurred nearly a
decade ago; the bus company is now out of business; and there is no
suggestion that any "threat" of future strikes (let alone alleged
racketeering acts) looms on the horizon. See H.J. Inc., 492 U.S. at
242 ("Predicate acts extending over a few weeks or months and
threatening no future criminal conduct do not satisfy this
(continuity) requirement."). If review of the person-enterprise issue
were warranted, it can await a case in which the issue appears to be
more relevant to the outcome.
2. Petitioner also challenges (Pet. 16-18, 24-26) the court of
appeals' gloss on RICO's requirement that the defendant have
participated in the "conduct of (the) enterprise's affairs" through a
pattern of racketeering activity in 18 U.S.C. 1962(c). The court
determined that to satisfy this requirement, a defendant must have
exercised some "significant control over or within an enterprise,"
which usually means engaging or participating in the "management or
operation" of the enterprise. Pet. App. 26-27. We agree with
petitioner that this formulation is incorrect and conflicts with the
decisions of other courts of appeals, but do not believe that this
case presents a suitable vehicle for review of the issue.
a. In considering the meaning of the "conduct" requirement, most
courts of appeals that have addressed the issue have adopted varying
formulations of the same general approach: they require some
relationship between the affairs of the enterprise and the defendant's
predicate acts of racketeering, but recognize that a coincidental or
tangential connection between a person, a legitimate enterprise, /8/
and the racketeering activity is not sufficient. For example, in
United States v. Scotto, 641 F.2d 47, 54-55 (2d Cir. 1980), cert.
denied, 452 U.S. 961 (1981), the court stated that "(s)imply
committing predicate acts which are unrelated to the enterprise or
one's position within it would be insufficient." But the court
rejected more rigorous tests that would require the predicate crimes
to relate to the "management or operation" of the enterprise, to
affect its "essential functions," or to further the enterprise's
affairs. Instead, the court stated that the "conduct" element is
satisfied where "(1) one is enabled to commit the predicate offenses
solely by virtue of his position in the enterprise or involvement in
or control over the affairs of the enterprise, or (2) the predicate
offenses are related to the activities of that enterprise." 641 F.2d
at 54. Two other circuits have followed the Scotto approach. United
States v. Provenzano, 688 F.2d 194, 200 (3d Cir.), cert. denied, 459
U.S. 1071 (1982); United States v. Yarbrough, 852 F.2d 1522, 1544
(9th Cir.), cert. denied, 488 U.S. 866 (1988). /9/
In United States v. Cauble, 706 F.2d 1322, 1333 (5th Cir. 1983),
cert. denied, 465 U.S. 1005 (1984), the court articulated a somewhat
different standard. Noting that Section 1962(c) requires a connection
between the defendant, the racketeering activity, and the enterprise,
the court stated that the "conduct" element entails a showing, where
the enterprise is a legitimate business, that "(1) the defendant has
in fact committed the racketeering acts as alleged; (2) the
defendant's position in the enterprise facilitated his commission of
the racketeering acts, and (3) the predicate acts had some effect on
the lawful enterprise." 706 F.2d at 1333. The test cannot be met
where a defendant simply "works for a legitimate enterprise and
commits racketeering acts while on the business premises." Id. at
1332. Nor does "a defendant's mere association with a lawful
enterprise whose affairs are conducted through a pattern of
racketeering activity in which he is not personally engaged" violate
RICO. Ibid. But the court took pains to note that establishing an
"effect" on the enterprise is not a stringent requirement; it can be
satisfied, for example, by the defendant's depositing of funds in the
enterprise's bank accounts. Id. at 1332 n.24. Cauble has been
adopted by two other circuits. United States v. Ellison, 793 F.2d
942, 950 (8th Cir.), cert. denied, 479 U.S. 937 (1986); United States
v. Pieper, 854 F.2d 1020, 1026 (7th Cir. 1988). /10/
b. In our view, both the Scotto and Cauble formulations are
consistent with the statute. Although employing different elements,
the formulations reflect similar underlying policies and have not led
courts to reach conflicting results in applying the requirement that
the defendant "conduct or participate, directly or indirectly, in the
conduct of (the) enterprise's affairs." 18 U.S.C. 1962(c).
The D.C. Circuit's formulation, however, is a departure from the
tests applied by the other circuits. Prior to the decision below,
although a few opinions favorably discussed a "management" standard,
no other court of appeals had firmly adopted one. /11/ In rejecting
the tests applied in other circuits, the D.C. Circuit stated that its
test was supported by the dictionary, which defines "conduct" to be
"synonymous with 'management' or 'direction.'" Pet. App. 25, quoting
Webster's Third New International Dictionary 473 (1961). But the
court's "plain language" analysis is far too restrictive. It is
generally recognized that persons who take part in carrying out the
activities of an enterprise without managing it or directing its goals
still "conduct" the enterprise's activities. For example, the
definition of "conduct" in 3 Oxford English Dictionary 691 (2d ed.
1989) includes the meaning, "To direct, manage, carry on (a
transaction, process, business, institution, legal case, etc.)," but
pointedly adds: "The notion of direction or leadership is often
obscured or lost; e.g., an investigation is conducted by all those
who take part in it." /12/ Giving RICO's terms their "ordinary
meaning," Russello v. United States, 464 U.S. 16, 21 (1983), the term
"conduct" does not entail the court of appeals' limitation that a
person must participate in "running the show." Pet. App. 26. Indeed,
a "management" or "significant control" limitation on the term
"conduct" reads words into the statute that "appear() nowhere in the
language or legislative history" of RICO. H.J. Inc., 492 U.S. at
240-241 (rejecting "multiple scheme" limitation on "pattern"
requirement because of lack of support in the statute or legislative
materials).
More fundamentally, the court failed to give heed to "the pattern
of the RICO statute in utilizing terms and concepts of breadth."
Russello, 464 U.S. at 21; see Sedima, S.P.R.L. v. Imrex Co., 473 U.S.
at 497-498 ("RICO is to be read broadly" in accordance with "Congress'
self-consciously expansive language and overall approach"). Congress
would hardly have made it unlawful to "conduct" or "participate
directly or indirectly, in the conduct of" the enterprise's affairs if
it had wanted to impose a narrow rule reaching only those who had
attained some "significant" level of control over the management or
operation of an enterprise. /13/ Rather, "Congress drafted RICO
broadly enough to encompass a wide range of criminal activity, taking
many different forms and likely to attract a broad array of
perpetrators operating in many different ways." H.J. Inc., 492 U.S. at
248-249.
The court claimed that its "management" standard best furthers
RICO's goal of prohibiting the illegitimate "acquisition or operation
of business," Pet. App. 28 (quoting S. Rep. No. 617, 91st Cong., 1st
Sess. 76, 81 (1969)), while preventing interference with the existing
framework of law governing other fields. Pet. App. 30. But far from
fulfilling Congress's goals, the court's standard is at odds with
RICO's purpose to protect legitimate businesses against infiltration
at all levels. /14/ RICO prohibits not only the acquisition of an
interest in an enterprise with racketeering proceeds (Section
1962(a)), and the use of illegitimate means to gain an interest in or
control over an enterprise (Section 1962(b)), but also the corruption
of an enterprise that can occur when it is conducted through a pattern
of racketeering activity (Section 1962(c)); in the last setting, even
criminal actions far below the level of senior management can yield
significant profits to wrongdoers and thwart the attainment of the
enterprise's legitimate goals. For example, outsiders who assist the
enterprise to commit crimes, use its resources for criminal purposes,
or influence its actions by the payment of kickbacks to subordinates,
surely "participate * * * in the conduct" of its affairs through the
prohibited pattern, even though not significantly controlling its
overall goals. The courts have consistently construed RICO to reach
that sort of misconduct. /15/
RICO's major purpose is to eliminate the "infiltration of organized
crime and racketeering into legitimate organizations." S. Rep. No.
617, supra, at 76. Such "infiltration" can take place gradually, and
perniciously, long before it reaches the corporate boardroom.
Accordingly, because "the RICO net is woven tightly to trap even the
smallest fish, those peripherally involved with the enterprise,"
United States v. Elliott, 571 F.2d 880, 903 (5th Cir.), cert. denied,
439 U.S. 953 (1978), a "conduct" test limited to those who exercise
significant control over the enterprise cannot be reconciled with
RICO's objectives.
c. Although the formulation applied by the court in this case
departs from the approaches devised by the other courts of appeals, we
do not believe that it presently warrants this Court's review. To
begin with, only one other court of appeals has considered whether a
union participated in the conduct of a company's affairs through
strike violence, and that court rejected the application of RICO under
the Cauble standard. Overnite Transp. Co. v. Truck Drivers Local No.
705, 904 F.2d 391, 393-394 (7th Cir. 1990) (holding that union's
relationship to the company did not facilitate its commission of
predicate acts). Review is not justified here to clarify a legal
standard that would likely not aid petitioner in any event.
More importantly, the implications of the D.C. Circuit's test are
murky. The court of appeals stated that its construction of the
statute still allows for RICO liability of outsiders as well as
insiders; the crucial issue is "whether and to what extent that
person controls the course of the enterprise's business." Pet. App.
27. The court also appeared to accept the view that a RICO defendant
need not advance the enterprise's affairs through the predicate
crimes, or receive the enterprise's authorization to conduct them.
Id. at 17-18. Accordingly, despite the court's efforts to articulate
an intelligible standard, it is difficult to foresee how the court
will apply its "control-over-the-management-or-operation" test on
other facts. For example, if presented with a contractor's payment of
bribes to a government employee to influence official action, the
court may well find the requisite degree of "control" over the
enterprise's "operations"; if so, the D.C. Circuit's conduct standard
may, in practice, converge with that of other courts of appeals.
Absent application of the court's approach in concrete factual
settings, we are uncertain that the principle announced below will
lead to results warranting review by this Court.
Further undermining the need for review is the fact that the result
here appears to be colored by labor law considerations not relevant in
the typical RICO case. /16/ From a labor perspective, it is somewhat
counterintuitive to label a union as participating in the conduct of
the company's affairs through engaging in a recognition strike. To be
sure, in applying the economic leverage of a strike, a union seeks to
advance its members' interests by affecting how management conducts
the company's affairs: i.e., whether management will recognize the
union or accede to its demands. But the same is true with respect to
typical contract negotiation between the company and, say, a supplier.
The supplier applies such economic leverage as it can to advance its
interests by affecting how management conducts the company's affairs:
i.e., what prices management will pay for the supplier's goods. Yet
the latter situation, without more, has never been understood as
satisfying RICO's "conduct" requirement.
RICO, of course, does apply to strike violence if the elements of
the statute are otherwise satisfied, see United States v. Thordarson,
646 F.2d 1323, 1329-1331 (9th Cir.), cert. denied, 454 U.S. 1055
(1981). Indeed, the court of appeals allowed petitioner's RICO claim
to stand against the business agent of Local 639, who was alleged to
have conducted the affairs of the union through a pattern of
racketeering. Pet. App. 37. But at least on the facts alleged here,
the economic antagonism between the struck company and the union
supporting a recognition strike diverges from the type of infiltration
of, or involvement in, an enterprise that lies at the base of RICO's
"conduct" requirement.
Because the "conduct" requirement, like other RICO elements, may be
satisfied "in a variety of ways, * * * it (is) difficult to formulate
in the abstract any general test." H.J. Inc., 492 U.S. at 241. This
unusual case, if anything, exacerbates those difficulties. In our
view, if the Court were to fashion a general test for the "conduct"
requirement and then apply that test to a specific case, it would give
better guidance to the lower courts if the case selected for review
presented a more characteristic application of RICO than is presented
here.
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
JOHN G. ROBERTS, JR.
Acting Solicitor General /17/
ROBERT S. MUELLER, III
Assistant Attorney General
MICHAEL R. DREEBEN
Assistant to the Solicitor General
KATHLEEN A. FELTON
Attorney
MAY 1991
/1/ Under 18 U.S.C. 1962(c), it is unlawful "for any person
employed by or associated with any enterprise * * * to conduct or
participate, directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering activity." 18
U.S.C. 1962(d) prohibits conspiring to commit that offense. Pursuant
to 18 U.S.C. 1964(c), "(a)ny person injured in his business or
property by reason of a violation of section 1962 of this chapter" may
recover treble damages, costs, and attorney's fees.
/2/ In May 1984, Woodward's false arrest claim was dismissed after
he reached a settlement with the city. Pet. App. 50.
/3/ The court also rejected Yellow Bus's contention that it could
avoid the person-enterprise requirement by characterizing the
enterprise as an "association-in-fact" consisting of Local 639 and
Woodward. The court explained that "an organization cannot join with
its own members to do that which it normally does and thereby form an
enterprise separate and apart from itself." Br. in Opp. App. 18a.
/4/ The court excluded from consideration alleged predicate acts of
violent conduct that were not directed at Yellow Bus or connected to
its labor dispute, but found that the remaining four predicate acts
appeared to satisfy the "pattern" requirement. Br. in Opp. 12a-13a.
/5/ The en banc court left undisturbed the panel's conclusion
concerning the requirement of nonidentity between the "person" named
as the RICO defendant and the "enterprise" in the conduct of whose
affairs the person has participated. Pet. App. 8-11.
/6/ Petitioner also presents two other questions that do not
warrant review. Pet. ii. First, petitioner raises the issue of
whether the court of appeals erred in excluding acts of racketeering
not directed at Yellow Bus from the alleged "pattern of racketeering
activity." The language to which petitioner refers in the court of
appeals opinion (Pet. App. 67) does not necessarily imply, as
petitioner believes (Pet. 26-27), that every predicate act alleged by
Yellow Bus must cause injury to the plaintiff. A plausible reading of
the court's statement is that some of the acts alleged were not
sufficiently "related" to other predicate acts to form the requisite
pattern. See Pet. App. 67. In any case, petitioner's objection is
not squarely presented here because the court found four other
predicate acts that it thought did adequately allege a pattern (id. at
67-68); its disregard of the other allegations is therefore
irrelevant to the outcome, particularly since, as petitioner concedes
(Reply Br. 7), Yellow Bus "cannot, of course, collect damages for acts
injurious to others."
Second, petitioner suggests (Pet. 20-21, 27) that the court of
appeals' holding is inconsistent with RICO's liberal-construction
direction. 18 U.S.C. 1961 note. In our view, that issue does not
independently warrant review, as the questions presented here can be
satisfactorily resolved, as in other RICO contexts, by construing the
statutory language and structure, and the legislative purposes
revealed by the statute's background. See United States v. Turkette,
452 U.S. 576, 587 & n.10 (1981); cf. Sedima, S.P.R.L. v. Imrex Co.,
473 U.S. 479, 491 n.10 (1985) (suggesting that liberal-construction
direction may apply only to remedies provided by RICO in 18 U.S.C.
1964). In any event, petitioner is wrong in contending (Pet. 20) that
the court of appeals relied on a strict construction principle in
ruling against it. The court made clear that the general rule that
ambiguous penal statutes should be construed narrowly was "consistent"
with but not "essential to our decision." Pet. App. 33.
/7/ But see Atkinson v. Anadarko Bank & Trust Co., 808 F.2d 438,
441 (5th Cir.) (enterprise consisting of bank, holding company, and
three employees was not separate entity from defendant bank), cert.
denied, 483 U.S. 1032 (1987); Entre Computer Centers v. FMG of Kansas
City, Inc., 819 F.2d 1279, 1287 (4th Cir. 1987) (defendant corporation
could not be combined with its franchisees, or its officers and
directors, to form a separate enterprise). Petitioner does not
challenge the court of appeals' ruling here (Pet. App. 9-11, 78-81)
that Local 639 and its business agent did not constitute a valid
"association-in-fact" enterprise that was distinct from the union
alone.
/8/ A legitimate business for this purpose is one, as the Court
described it in H.J. Inc., 492 U.S. at 243, that "is not a business
that exists for criminal purposes." When the enterprise is wholly
illegitimate, the connection of the predicate crimes to the
enterprise's affairs is usually easy to establish.
/9/ The Second Circuit has consistently applied Scotto, see United
States v. Simmons, 923 F.2d 934, 951 (1991) (collecting cases),
without describing how the predicate acts must be "related" to the
enterprise. But none of that court's cases has tolerated the type of
happenstance relationship suggested in hypotheticals posited by the
court of appeals (Pet. App. 18) in its criticism of the Scotto test.
In Scotto itself, the defendant union official had received bribes and
kickbacks from waterfront employers for using his influence to reduce
inflated workman's compensation claims and to aid the employers in
securing business. It appears that this is the type of "relatedness"
that the Second Circuit had in mind, rather than the attenuated
relationships in the hypotheticals posited by the court below. See
also Simmons, 923 F.2d at 952.
/10/ The Eleventh Circuit declined to adopt or reject Cauble in a
case where it was clear that the defendant's routine use of a
legitimate enterprise's resources made "possible the racketeering
activity." United States v. Carter, 721 F.2d 1514, 1527 & n.16, cert.
denied, 469 U.S. 819 (1984). Other decisions of that court state that
the predicate acts must be "helpful or necessary" to the operation of
the enterprise, while making clear that involvement in the
enterprise's activities "in a significant manner" is not demanded.
Bank of America v. Touche Ross & Co., 782 F.2d 966, 970 (1986)
(accountants who allegedly certified false financial reports that
facilitated a company's qualification for loans could be liable under
RICO).
/11/ The Eighth Circuit suggested in Bennett v. Berg, 710 F.2d at
1364, that "some participation in the operation or management of the
enterprise itself" is ordinarily required, but in a later case it
endorsed the Fifth Circuit's Cauble standard. United States v.
Ellison, supra. The Fourth Circuit indicated similar views in United
States v. Mandel, 591 F.2d 1347, 1375 (1979), vacated on other
grounds, 602 F.2d 653, cert. denied, 445 U.S. 961 (1980), but that
court since noted that "the Mandel opinion is not binding upon us,"
United States v. Webster, 639 F.2d 174, 185 (1981), modified, 669 F.2d
185, cert. denied, 456 U.S. 935 (1982), and it upheld a RICO
conviction where the defendants' participation in the conduct of the
enterprise's affairs consisted of using a club's telephone,
facilities, and personnel to facilitate narcotics transactions,
Webster, 669 F.2d at 187 -- a holding that implicitly rejects a strict
"management" approach.
/12/ To same effect is Webster's Dictionary of Synonyms 184 (1942)
(emphasis added) which states that "(c)onduct may imply the act of an
agent who is both the leader and the person responsible for the acts
and achievements of a group having a common end or goal * * *, but
often the idea of leadership is lost or obscured, and the stress is
placed on a carrying on by all or by many of the participants."
/13/ Congress is quite familiar with language that restricts a
statute's reach to the leaders or managers of an enterprise. See 21
U.S.C. 848(b) (prescribing penalties for "(a)ny person who engages in
a continuing criminal enterprise * * * if -- (1) such person is the
principal administrator, organizer, or leader of the enterprise or is
one of several such principal organizers, or leaders").
/14/ The legislative history on which the court chiefly relied, S.
Rep. No. 617, supra, at 81, explained the need for civil remedies
analogous to divestiture in the antitrust field; it did not comment
on Section 1962(c)'s coverage. Indeed, in its section-by-section
analysis of the bill, the Report makes clear that to trigger the
application of Section 1962(c), no minimal "percentage" of the
enterprise's activities need be affected by racketeering. Unlike
subsection (a), which provides an exception to the prohibition against
investing funds derived from racketeering activity into an enterprise
"where there is no resulting control in law or in fact to the
investor," subsection (c) applies to any "conduct of the enterprise
through the prohibited pattern"; "there is no limitation on the
prohibition." S. Rep. No. 617, supra, at 159.
/15/ See, e.g., United States v. Roth, 860 F.2d 1382, 1390 (7th
Cir. 1988) (lawyer who bribed judges participated in the conduct of
the court's affairs), cert. denied, 490 U.S. 1080 (1989); United
States v. Horak, 833 F.2d 1235, 1239 (7th Cir. 1987) ("'conduct' in
section 1962(c) does not mean 'control' or 'manage'"; employee of
subsidiary participated in the conduct of parent company by
fraudulently procuring contracts for the subsidiary, which financially
benefitted the parent); United States v. Yonan, 800 F.2d 164, 168
(7th Cir. 1986) (defense attorney who attempted to bribe prosecutor to
influence the disposition of cases participated in the conduct of
affairs of state's attorney's office), cert. denied, 479 U.S. 1055
(1987); United States v. Jannotti, 729 F.2d 213, 226-227 (3d Cir.)
(city councilman participated in the conduct of a law firm's affairs
by accepting bribe to facilitate approval of transaction from which
the law firm stood to benefit by representing the bribe payer), cert.
denied, 469 U.S. 880 (1984); United States v. Watchmaker, 761 F.2d
1459, 1475-1476 (11th Cir. 1985) (defendants participated in the
conduct of motorcycle gang's affairs by engaging in a few acts of drug
dealing and extortion with and at the behest of gang members), cert.
denied, 474 U.S. 1101 (1986).
/16/ The court of appeals was clearly troubled by the possibility
that if RICO applied in this case, it might also apply in innumerable
other labor-management clashes, thus effecting a complete reworking of
federal labor law. Pet. App. 30-33. To the extent that this concern
influenced the court's analysis, the usefulness -- and scope -- of the
test the court fashioned to decipher the "conduct" requirement may
well be limited.
/17/ The Solicitor General is disqualified in this case.